The Effects of Reverse Splits on the Liquidity of the Stock

Ki C. Han

Journal of Financial and Quantitative Analysis, 1995, vol. 30, issue 1, 159-169

Abstract: This study investigates the liquidity effects of reverse stock splits using bid-ask spread, trading volume, and the number of nontrading days as proxies for the liquidity of the stock. Results indicate a decrease in bid-ask spread and an increase in trading volume after reverse splits. More importantly, the number of nontrading days significantly declines following reverse splits. For the control group, however, no such changes are observed. These results suggest that reverse splits enhance the liquidity of the stock.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:30:y:1995:i:01:p:159-169_00

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